Vol. 3 :: No. 10 October, 2001 (Ashoj-Kartik)

Cover Feature

A Surgery of Tourism Industry

Peace is the basic prerequisite for the survival of tourism, one of the fastest growing industries in the world. Ironically peace is missing from the world, including Nepal. Coincidentally, there cannot be a better slogan than "TOURISM: a tool for peace and dialogue among civilizations" which is this year’s theme of the World Tourism Day. Tourism is one of the mainstream of the Nepalese economy employing more people directly and indirectly than any other industry in the country. But this major foreign exchange earning sector of our country has suffered the worst set back in the year 2001 due to both internal and external events and the situation seems nowhere to improve until the middle of the year 2002, speculate tourism experts. The six year long Maoist insurgency and the Royal massacre has done a great deal of damage to the tourism industry creating a sense of insecurity both among the tourists and tourism entrepreneurs. Now in the aftermath of the terrorist attacks in New York and Washington and the subsequent US retaliatory strikes on Afghanistan has further deteriorated the situation. Many international groups, particularly from America and Europe have cancelled their hotel bookings according to Hoteliers who fear the present situation is the worst in the history of Nepalese tourism industry. The cancellations will badly affect tourist business till the middle of the year 2002, say tourism entrepreneurs. This year’s tourist season witnessed a plunge of 20 percent average hotel occupancy in contrast with last year’s 70 to 75 percent occupancy.

To address this crisis Nepal needs to explore new possibilities and launch aggressive marketing strategy, say tourism experts. There is a dire need to explore new markets in the wake of growing tension between the United States and Afghanistan which has taken a global dimension. Nepal, sandwiched between two giant Asian neighbours with a combined demography of more than 2 billion population, one third of the total humanity, need not worry about the future of our tourism, if only we know how to address the situation. The thriving middle class population of India, which can afford traveling, is more than the total population of entire Europe! But due to our weak and shortsighted marketing strategy and publicity we are getting only a small chunk of the Indian tourists. Similarly, we have not made efforts to exploit the Chinese market, a potential source of a large number of holiday makers.

The Indian tourists who used to have 50 per cent share of the international visitors traveling to Nepal, have declined in the aftermath of the hijacking of an Indian Airlines jetliner from Kathmandu. But no serious effort has been made to raise the confidence of the Indian tourists and the unfortunate incidents like that of Rithik Roshan riot has only worsened the situation further. However, no serious effort has so far been made to boost Nepal’s image in the Indian market. Neither the government nor the private sector seem really serious in exploring the ever-growing Indian market.

China could be another major tourist market for Nepal, which may help compensate the loss caused by US strikes against Afghanistan in its anti-terrorism campaign. But Nepal does not have any tourism agreement with China, the world’s most populated country! The signing of a comprehensive tourism agreement between Nepal and China will nodoubt help in tourism growth. The agreement may lead to a breakthrough in opening up new areas for tourism potentials. At present Nepal doesn’t have airlinks with any Chinese cities other than Shanghai. As such Nepal should expand air links with Chinese cities like Beijing, Lhasa and Xian in order to promote Chinese tourists.

The Nepal Tourism Board, established with the aims of injecting professionalism in tourism and launching an aggressive marketing campaign in international tourism market has not been able to perform up to the expectations of the tourism entrepreneurs. The board seemingly lacks proper vision as well as aggressive marketing strategy. The government is also not making any serious endeavors to rescue tourism industry from the present catastrophic scenario. In such a situation, whether the objectives of the proposed Destination Nepal Year 2002 can be achieved, is a point taken by tourism experts.

The US strikes in Afghanistan which may extend for a considerately time is sure to affect the tourism industry in every countries, including that of Nepal. For, it is an open secret that almost all of Nepalese tourism activities are heavily dependent on tourist arrivals from the US and Europe to not only keep the tourism industry afloat but also to earn the much-needed foreign exchange. Tourism, as all know, is a very volatile industry in seems that it is very susceptible to any social, economic or political problem, be it in the tourists’ country of origin or in the country where their destinations are located. Or, for that matter, in those countries and regions that the tourists have to pass through while heading for their destinations.

Since Nepal is not only heavily dependent on tourist arrivals from the US and Europe but is also located in a region where US and its coalition partners are carrying out their military actions, what is certain is that the nation’s tourism sector is heading for turbulence.

But still, this surely does not absolve the concerned tourism authorities from either the public or private sector in not doing enough to cushion the tourism industry from adverse effects emanating from different directions. The inordinate dependence on tourist arrivals from only a few countries to keep the nation’s tourism industry’s wheels rolling is a case in point. Had the concerned tourism authorities from both the public and private sectors made it their responsibility to go all out to woo tourists from different nations and regions, the nation’s tourism industry would not be facing such a stark and frightening scenario as it is witnessing now. Rather, it would have afforded the nation’s tourism industry some opportunity to compensate the loss expected from less tourist arrivals from one region where trouble is brewing up by the gain garnered from sustained tourist arrivals from another region where there is no trouble.

This, in turn, could be due to the lack of short and long-term tourism promotion policies, plans and strategies on the part of the concerned officials from both the public and private sectors. However, the establishment of the Nepal Tourism Board and the levying of 10 per cent service charge on hotels and restaurants to give it the much-needed money do give the impression that they have such policies, plans and strategies up their sleeves. Yet, the general impression among those closely associated with tourism industry and sector is that the NTB, even with its about Rs.130 million budget per year, is lagging behind in gearing up its tourism promotion activities at home and abroad.

While one may argue about the tourism products there is ample room for grievances. Banking on the same traditional products is not enough to cater to the demands of every section of the potential Nepal visitors. Though there have been some attempts to create new products, it has not been adequate.

The smaller arrivals has led to cut-throat competition among participants of all the sections of the tourism industry. This means reduced revenue and that affects the development activities of the country. This unhealthy competition has also led many to dub Nepal as a cheap destination. Budget tourists are essential but the country must be able to meet the demands of the discerning tourists.

Whatever may be the reason for the drastic fall in the number of tourists visiting the country it is a matter of grave concern.

At present, tourism occupies the second largest area in world trade, next to oil. It is, moreover, one of the fastest growing sectors of economic activity. In most countries including Nepal, tourism has grown since the late 1970’s from being a marginal aspect of national economic life to an important socio-economic asset.

The amount of money spent is a more reliable indicator of the level of international tourist activity that Nepal experiences than travel statistics. Statistics published by the World Tourism Organization indicate that international tourism receipts have increased almost eleven-fold since 1972. International tourism receipts are the receipts of countries in the form of consumption expenditure - payments for goods and services made by foreign tourists out of foreign currency resources. Our study indicates that Nepal’s tourism receipts have increased over fifty-fold since 1974-75.

Eco-tourism: A significant recent phenomenon in the tourism industry is "eco-tourism" or "nature tourism" which is gaining importance rapidly in a number of countries. There is a growing awareness worldwide that unspoiled nature, and from the point of view of the tourist, "exotic" ecosystems have a real economic value. Most of these tourist assets are still very underpriced. Many studies indicate that tourists are willing to pay more if they know that the extra money will be used to help protect the special features that they have come to see. In Nepal, six out of ten trekkers in the Annapurna area said they would pay US $ 5 to US $ 10 more than the current government fees, if they knew the money would be used in programmes to conserve the area.

In Nepal, "nature tourism" is the leading foreign exchange earner as visitors are attracted primarily by the Himalayan geography.

Recommendations: Travel trade experts recommend that in future Nepal should seek to raise foreign exchange earnings by raising the price of the Nepalese tourism product in real terms, extending the stay of the sightseeing visitors, and increasing the opportunities which the tourists have for spending.

Nepal should target an increase to 950,000 tourists in 2010, say experts and that the aim should be to increase the number of tourists from countries such as Japan, and to lengthen their stay in Nepal. If the targets are to be achieved, considerable investment in marketing and product development is needed. To date, tourists have come to Nepal as a result of their own interest in the country and in the Himalayas. For tourism to continue growing, it will require a more vigorous and determined marketing effort.

Pattern of development: Tourism since its infancy in Nepal has been concentrated in the Kathmandu Valley. Trekking has led to the dispersal of tourists, but the proportion of tourists going to Pokhara has remained at around 20 percent of the total for the last three decades. Even trekking is concentrated in three areas: Annapurna, Langtang, and Khumbu. There are great opportunities for widening the spread of tourists in Nepal. These depend on improvements in transport including domestic air services. Flights must be made more reliable and easier to book.

Rescue package must for tourism industry: Joy Dewan

Tourism is not aloof from the incidents that happened in recent months both at home and abroad. Nepal’s tourism has been badly hit following the Royal massacre at home and the attacks on the USA.

Joy Dewan, newly elected President of Nepal Association of Travel Agents (NATA), has said that an urgent rescue package is the need of the hour to save the already crippling tourism industry. Business Age editorial team had a brief interview with Mr. Dewan to explore the impact of the incidents on Nepalese tourism .

The previous executive committee, I would say, was performing well. However, there still is immense scope to better the institution and expand its activities for the betterment of the entire tourism sector. We have to increase the horizon of the progress we have made so far. Of course, there are limitations of work and we have to look for solutions within the periphery of those limitations. I, too, have limitations. Therefore, I need support from each and every member of NATA. I welcome suggestions from every member.

It is true that tourism is facing difficulties from reasons beyond the industry’s control. This difficulties is further compounded by cut-throat competition among travel trade people themselves. Now it is high time that we all have to admit that the entire travel trade industry has the same objective and same problems, therefore, it has to be addressed collectively.

Travel agencies are finding themselves difficult to sustain because they have not been able to survive with their 9 per cent commission which they have to share with their clients. I must say the clients are exploiting the travel agencies. What is needed is unity in respects of not sharing commission with their clients. Anyway clients are already benefiting from the competition among the airlines. For example, the Sri Lankan government with the help of their Tourism Board has issued circular that if any commission is given to the clients the government will cancel their license which was also effectively implemented. We want the same thing in Nepal with the help of the government.

First, in order to strengthen NATA, we have to increase its members. There are about 600 registered travel agencies but only 177 are NATA members. This is not enough. Once we can increase the members , we will be financially strong.

Second, we have to put some kind of control for further issuing licenses to new travel agencies to prevent unhealthy competition, control the quality and to protect the existing travel agencies. Here I must say the government is acting on ad-hoc basis. For example, when I bought Zenith Travels way back in 1987, the government had stopped giving license. But now it is all out open again. We would like to request the government to impose the restriction on license for at least one to two years more. Although we are aware that protectionism is no more an ideal catche in the present open market system. However, our country has become the Land of Travel Agencies.

How you are watching the current global tourism scenario ?

A lot of incidents are beyond our control. But that does not mean that we should keep quite. We have to take initiative whereby we can achieve our objectives to some extent if not 100 per cent. We have to draw plan – short term, mid-term and long term – to rescue our tourism sector . In this regard, we have already sat together with leaders of other tourism organizations. If the government agrees, we should go for similar measures which Sri Lanka adopted following the tragic blast in its airport that damaged several wide-bodied aircraft. The measures were, among others, waiving off landing fees for airlines and charter flights, heavy concessions on operation costs, tourism package consisting of 15-20 per cent discount for tourists in every sector pertaining to the tourists visiting this country etc. I recall that NATA has already submitted a similar package to the government.

NATA would thrive for excellent relations with other tourism associations. And we would work to ensure that the Essential Service Act, Industrial Act etc are properly implemented for the betterment of tourism.

How is the tax scenario in travel trade sector ?

The whole industry is facing tax problems. Ironically, even the new tax which is already passed by the parliament is said to be more complicated. However, my suggestions to all members is we must not evade tax, otherwise, the government cannot run. However, I believe tax has to be transparent on both sides – entrepreneurs as well as the government.

Has the US incident affected airline business in Nepal ?

Yes, to some extent. For example, Dragon Air which was supposed to resume its flights to Kathmandu from October 28 has now suspended its operations altogether due to this event. Even talks of Sri Lankan Air coming to Nepal has now chilled out. Not only that, other airlines’ flights cancellations are also being recorded following the US event.

How do you view the recent agreement between Necon Air and Shangri-La Air ?

I believe it is in the right direction. In fact, we had suggested HMG about such measures five to six years ago. We strongly believe a consortium of domestic airlines would be more effective and beneficial for the nation in the present context. This way, we can also tie up with major regional carriers. This will be more comfortable and sustainable for everyone in the sector. If you go to the airport, you will find 10 aircraft belonging to 10 different airlines! This is not healthy.

How we can lure Indian tourists to visit Nepal at this difficult juncture ?

You see, there is a need to work at people level more than the diplomatic level. We should not harbour anti-Indian feelings. This is counter-productive for our tourism. Rather we should coordinate with bodies like Nepal-India Chamber of Commerce and Industry (NICCI), and Human Development and Friendship Society (HDFC). In turn, this will benefit our tourism industry.

Following are the collective demands put forth by representatives of Nepal Tourism Board (NTB) and Presidents of Hotel Association Nepal (HAN), Nepal Association of Travel Agents (NATA), Trekking Agents Association of Nepal (TAAN) and PATA-Nepal Chapter to the government to rescue Nepalese tourism after a series of recent adverse national events and the current US led strikes on Afghanistan which has badly shaken the international tourism scenario including that of Nepal.

Short Term Measures

a) To waive the different types of visa charges levied on tourists because if tourists stop coming government revenue will suffer. But if visa charge is waived, tourists who come in our region may still be tempted to visit Nepal.

b) There should be fifty percent reduction in all sorts of charges imposed on all air companies and chartered flights coming to Nepal. This will give a good reasons for foreign airlines not to discontinue their flights to Nepal.

c) There should be fifty percent reduction in film tariffs so that foreigners will make even more documentaries, feature films etc which in turn will contribute in attracting more tourists to Nepal.

d) There should be 50 per cent reduction in entrance fees imposed on tourists to enter Durbar areas of Kathmandu, Patan and Bhaktapur.

e) There should be 50 per cent reduction in entrance fees imposed on tourists to enter the national parks. This will help in lengthening tourist stay in Nepal.

a) The government should contribute Rs. 50 million to Nepal Tourism Board’s annual budget and should waive 50 per cent charges from the amount that private sector tourism entrepreneurs have to pay to participate in tourism fairs coordinated by NTB.

b) There should be an addition 65 days of extra time for tourism entrepreneurs to submit VAT because this is a difficult moment for the tourism sector. Therefore, there could be delay but no reduction in govt revenue collection.

c) 75 percent of tourists coming to Nepal go for trekking. The provision of ‘Environment Officer’ to escort trekkers should be annulled as this provision is not yielding any benefit for anyone but increase expenditure. Besides, the government should open more and more trekking routes.

a) The government should think towards saving Rs. 50 million which it gives to Nepal Tourism Board. Instead that amount could be more effective if spend on areas decided by a joint meeting of tourism entrepreneurs.

b) HMG should allow tourists to climb upto 6,500 meters peaks. This will help tourist inflow into Nepal.

c) The long term, short term, bridge gap, AOC/BLC, loans taken by tourism entrepreneurs from commercial banks should be converted into Single Term Loan; the deadline set to pay loan interests should be rescheduled. Besides, interest rates set by banks should be lowered and provision to grant addition long term loans should be made.

Visitors Survey: Easy to Understand, Difficult to Implement

The findings of the Departing Visitors Survey conducted between May and June-2001 by MARG Nepal have been released recently by Nepal Tourism Board are included in this cover story in detail. Initial reaction to the findings appears to be favourable from all quarters as it shows Nepal is still a desirable destination despite all hullabaloos. In my opinion, it would be much better to analyses this survey keeping in view with the one that MARG Nepal conducted in 1997 for UNDP’s Partnership for Quality Tourism. Since 1997, nothing has changed much in the tourism front. But despite tourists saying Nepal is friendly country and they are satisfied with the service provided, tourist arrival is yet to hit half a million number. Let me compare these findings conducted by same organisation in 1997 and 2001.

The length of stay of average tourists has been increased from 14 nights to 19.5. It is quite healthy trend to find tourists staying more in Nepal. According to the 1997 survey, total average visitor expenditure per night was US$ 99 with US$ 20 spent on accommodation, US$ 12 on food and beverage. However, the findings of earlier survey conducted Department of Tourism says that per night spending was US$ 49. But per night spending in Nepal by Free Individual Tourists(FIT) during the May/June 2001 comes to be US$ 31.5. For tourists travelling in the group, US$ 389 is the price for package tour. This time MARG separated package tourists and FIT in conducting survey. It is difficult to say whether both surveys conducted by MARG use same methodology to access the tourists spending. Decrease in spending could be due to devaluation of Nepalese currency from 56 to 76 rupees per dollar between 1997 and 2001. The 1997 survey found that nearly half of the visitors considered scenic beauty and mountains as the most important factor for selecting a holiday destination and it is still same with the 2001 survey. The 2001 survey also endorses the 997’s finding that Nepal is friendly and hospital destination for them.

* 25% of the tourists avail package tours.

* Average length of stay among:

O Independent tourists is 24 days

O Package tourists is 15 days.

* Majority of the tourists use inexpensive guest house and hotel accommodation

* Kathmandu Valley, Pokhara, Nagarkot, Annapurna Region, and Chitwan are the major tourist destinations.

* Shopping, sight-seeing of temples and city, trekking, buying of gifts and handicrafts are the activities most tourists indulge in.

* Majority of the tourists (90%) were satisfied with the quality of the tour. Despite four years’ gap, problems have not been changed and there is still a great need to improve them. Quality of air and environment, facilities in the airport and quality of local transport are the same problems that the 1997 survey pointed out which this survey also has made as areas requiring inervention. The survey has always been a good indicator but cannot be regarded as the best one without any fault. This survey, conducted among 1702 tourists from different countries, is not an indicator for general Nepalese tourism industry because June was a very turmoil period for Nepalese tourism industry due to the Royal carnage. One of the major reasons for low spending is that the price of Nepalese tourism products has decreased because of stiff competition among tourism entrepreneurs.

Devaluation of Nepalese currency is another factor that determines the dollar spending in Nepal. The budget tourists who come to Nepal travelling other countries countries get financially exhausted when they enter Nepal. But the problem with recommendation of the survey is that it never gets implemented. Let me conclude the write-up with the recommendations made by the 1997 survey conducted among 65 key influencers with Nepal representing hotels, travel agents, airlines, business and publishing sectors which have not been implemented yet.

* Influencers emphasised on augmenting air seat capacity which was felt to be the major barrier for the growth of tourism. The trade also need to introspect on its own business practices, discouraging price competition and volume generation per seat and concentrate more on improving quality adding value and charging premium rates. Current products needed serious review and up-gradation in services and infrastructure.

* To promote tourism, Nepal should be aggressively promoted, accentuating on three broad areas i.e.

O -Building awareness of Nepal through extensive media presence, aggressive advertising and promotion through international operators.

O -Developing innovative products like theme holidays, pilgrimage packages, Himalayan resorts, new adventure sports, village tourism, business tourism etc.

O -Focusing on emerging segments like the Asian market, children and older age group and business conferences.

"Maintain natural beauty to lure tourists"

Interview with Mr and Mrs Johann Hockred of Austria, the first guests to enter Hotel Everest on World Tourism Day.

This is not the first time we have landed in Nepal and so we knew Nepal to be a really beautiful country. But this time, we observed a lot of differences which we hadn’t witnessed in our visit 12 years back.

What are these differences?

First is the airport which now offers services of almost international standard. And, when we entered the city there also we marked tremendous changes, specially in the traffic. 12 years ago, there was hardly any traffic. As we entered the hotel, all of a sudden, many people started crowding around us, congratulating us with beautiful flowers. We were unknown with what was going on. It was as if we were being mistaken for some other VIPs. Later on, we came to know that today is World Tourism Day, and so we were warmly welcomed as international VIPs and with such a big reception. This was quite a change in behaviour from China and Tibet, where we didn’t find such hospitality in the hotels there. It wasn’t very good.

So, there is a difference in hospitality in the hotels of Tibet & China and Kathmandu?

Yes, most definitely.

What is different?

The difference is in service. In Tibet and also in China you don’t feel you are being welcomed like a guest. People aren’t very friendly.

You also noticed the warmth at the airport itself?

Of course, there is drastic change at the airport. And, there too the people were very friendly offering us their services. The people carrying the luggage also speak and understand English unlike in China where very few people speak English. And, also in hotels here you find people speaking English.

Is this is your second or third trip?

This is our second trip. We have had very nice impression from our first visit. So we decided to come again.

Even if the airport and the traffic has changed, have the people changed?

No. We have had personal talk with several people where ever we went and they were very friendly and kind. The touch is very homely. We have felt the closeness in one day which is not a very long time. And, what we also find very positive is the initiation to preserve historical things and sites. It is good idea to preserve cultural heritage for the future. This is the root which you can hand over to your coming generation.

Which flight are you taking back?

We will be flying by the Austrian Airlines. We are going straight to Vienna and, of course, we have decided to come back to Nepal in near future.

Where did you go so far?

We went around the entire city. We really had a lovely day out. We also visited Bhaktapur besides Kathmandu.

How did you find Bhaktapur?

It was very beautiful. Bhaktapur is quiet and clean. I feel your country’s tourism business has leaped to almost international standard, offering very good products and services which, for me, at first glance, was unbelievable.

You have natural beauty and also cultural heritage. This I think should be kept and maintained and used as best as possible to boast your tourism industry. Your country offers the delights which the developed countries have already lost. As in Beijing and Shanghai they have destroyed all the historical sites, this is not the right thing because people wouldn’t go there to just see skyscrapers.

What do you recommend for tourism industry to boost tourism in Nepal?

Well, most importantly, you have kind and helpful people in the industry. The major thing to boost trave trade is to maintain peace and security. Since millions of people across the world come here to witness natural pleasure, maintain it to earn money and thereby develop your country.

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